Wednesday, April 1, 2009

Kentucky Fried Potholes With A Side Of Extra Crispy Hypocrisy

KFC, the fried chicken franchise, is offering itself as a corporate sponsor for pothole repair. An actor dressed as KFC founder Colonel Sanders and a road repair group got started this week in the franchise’s hometown of Louisville, Ky., filling up hundreds of holes.

Many of the repairs are decorated with a white stencil saying the spot was “Re-freshed by KFC” — a play on KFC’s ad campaign stressing the freshness of their chickens. KFC spokesman Russell Dyer said the crew is using “regular asphalt,” not day-old biscuits.

The franchise has issued an offer to mayors of cities nationwide, asking them to describe their street’s state of disrepair, with the intent of doing repairs in five cities.

Good lord. Remember when Neil Young and Eric Clapton traded barbs over use of their music in beer commercials? Amateurs!

Here’s a thought: maybe if Yum Brands, KFC’s corporate parent (as well as owner of Pizza Hut, Taco Bell and Long John Silver’s) paid their corporate taxes, cities like Louisville wouldn’t be so far behind in their pothole repair.

In the Yum case, first outlined in a lawsuit against a senior Yum executive in May 2004, federal investigators contend that when the company, with the help of KPMG as its auditor and tax adviser, set up a private insurer as a wholly owned subsidiary in 1998 to handle all of its insurance needs, it was effectively buying an Insureco shelter.

Specifically, the government has questioned a transaction undertaken in late 1999 by Yum's wholly owned insurer, Glenharney. In that deal, Yum, then known as Tricon Global Restaurants, sold a small equity stake in Glenharney to Credit Suisse First Boston for $8 million, including fees.

Because Glenharney held offsetting liabilities, in the form of unpaid claims, the sale resulted in a $112.5 million tax loss to Yum.

The I.R.S. contends that the sale served no legitimate business purpose and functioned solely to generate tax losses for Yum, to offset legitimate capital gains. Yum paid $750,000 in fees to KPMG for advice on Glenharney, according to court papers.

The I.R.S., which is auditing Yum for 1997, 1998 and 1999, intends to disallow the $112.5 million tax loss, according to court papers.